How Tax Reforms Affected Frontier in 4Q17
Telecommunications company Frontier (FTR) reported a net loss of $1.0 billion in 4Q17, but that loss included gains from recent US tax reforms. Frontier saw an approximately $830.0 million tax benefit in 4Q17.
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Tax reforms to benefit telecom companies
Based on the revised tax structure, US firms will now be taxed at 21% instead of the previous 35%. Any income repatriated back to the US will be taxed at a rate of 8%–15.5% as compared to 35% previously. The reduction in the tax rate will benefit firms that have invested overseas due to higher tax rates in the US. Companies with overseas cash holdings can now bring their investments back to the US at a lower tax rate, which could potentially boost the US economy, raise wages, and increase jobs.
As the chart above shows, a large number of telecom and media companies have already benefited from tax reform. In 4Q17, after the tax reforms were announced, AT&T (T) paid a special bonus of $1,000 to more than 200,000 of its US employees and expanded its US investments by $1.0 billion for 2018. For net income, Verizon (VZ), Sprint (S), and T-Mobile (TMUS) saw tax gains of $16.8 billion, $7.1 billion, and $2.2 billion, respectively.